New Delhi : Eight days to go before Finance Minister Arun Jaitley takes to the podium to present the Union Budget, which will be different from the 88 Budgets that came before it in Independent India. After all, it is the first one post the implementation of the Goods and Services Tax (GST), the country’s biggest tax reform.
Though the new regime was implemented from July 1, the Budget for 2017-18 had followed the age-old practice of listing tax revenue projections under various heads like customs duty, central excise, service tax and VAT alongside direct tax subheads like income tax and corporate tax. All tax proposals hitherto were featured in Part B of the Budget while Part A largely dealt with the financial policies and their respective significance in terms of spending by the government.
With GST swallowing up more than a dozen indirect taxes, including sundry cesses, Part B has become significantly shorter. Only proposals for changes in direct taxes and customs duty, and any declarations of policy changes or new government schemes/programmes remain to be presented in the Budget.
So Jaitley’s speech might not only be shorter, it is also unlikely to pack any nasty surprises. After all, it used to be the announcement of indirect tax proposals that used to directly impact the common man’s wallet by making things costlier or cheaper depending on the government’s policy for the year.
Then there were the sundry cesses that had been introduced in Union Budgets over the years. Think education cess, Krishi Kalyan cess, Swachh Bharat cess, clean energy cess…all 20 of which have also been subsumed by GST. According to a Media report, the Comptroller and Auditor General (CAG) claims that just six major cesses fetched the government Rs 4 lakh crore till 2016-17. Incidentally, over 45% of these funds collected remain unutilised but that’s besides the point. The good news is that the public no longer has to worry about a new cess being sprung on them come February 1.
This, of course, is not the first time that Jaitley is doing things differently. Last year, he scrapped the practice of presenting the Budget at the end of February, and in another first, the union and railway budgets were presented together.
The other thing that might be different in Budget 2018 is its populist overtones-last year’s Budget was more reformist-keeping an eye on general elections next year. With little room left to tweak indirect taxes and win hearts, Jaitley is widely expected to tinker with income tax exemption limits and/or tax slabs.
Even if he only hikes the exemption limit from the existing Rs 2.5 lakh per annum to Rs 3 lakh-a move that will benefit around 75 lakh people according to the latest SBI Ecowrap report-those earning above Rs 3.5 lakh stand to save Rs 2,500 in taxes.
And if Jaitley goes a step further to introduce a whole new tax slab catering to the growing number of people earning Rs 10-20 lakh, the savings become more pronounced. Let’s assume that this new slab is introduced at a tax rate of, say, 20% and the Rs 5-10 lakh bracket is taxed at 10% instead of the current 20%.
In this case, “those with income up to Rs 10 lakh will half their tax outgo on income in excess of Rs 5 lakh and people earning up to Rs 20 lakh will save Rs 50,000 plus one-third of tax outgo on income in excess of Rs 10 lakh,” says Archit Gupta, Founder and CEO of ClearTax, India’s largest consumer Income Tax e-filing website.
Source : Businesstoday